Eco 10-17-07 - Eco Notes 10/17/07 1. (Average Costs) a. Q:...

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Eco Notes 10/17/07 1. (Average Costs) a. Q: What happens if a tax is applied to each unit produced? i. AVC and AC will shift upwards b. Q: What if labor becomes more productive? Or wages go down? i. EXMP: Tin Cans and Cereal boxes 1. Profit maximization implies cost minimization (and vice-versa) 2. The cost minimizing amount of tin for a given volume of can is: a. H=1.27D b. Some exceptions include: i. Pop cans ii. Tuna Cans c. Why? i. There must be some aspect of the cans, that matter to consumers, that entice producers to make a more expensive can ii. Pop: you want it to fit in cans iii. Tuna: to keep meet pressurized at a healthy amount 3. Cereal Boxes a. Nature of products b. Cost of containing material c. Shelf space 2. Competitive Firm a. Specify type of market behavior on the part of firms i. Assume Firms are “competitive” 1. (Perfect competition) ii. Properties of a competitive firm 1. Take price as given a. The firm has no influence of the market price b. They can be considered “Price-takers”
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This note was uploaded on 04/07/2008 for the course ECO 2302 taught by Professor Smith during the Spring '08 term at University of Texas at Dallas, Richardson.

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Eco 10-17-07 - Eco Notes 10/17/07 1. (Average Costs) a. Q:...

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